New York Attorney General Files Lawsuits Against MoneyLion And DailyPay
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The New York Attorney General recently sued DailyPay and MoneyLion, accusing the two wage access providers of charging fees to the workers that amount to interest rates of up to 750%.
Letitia James, the Attorney General, stated that the companies were pretending to simply advance earned wages, but in actuality, they took advantage of New Yorkers. Tens of thousands of people were charged illegal high-interest loans, which severely damaged their financial health.
The AG stated that workers typically use these services for small paycheck advances of under $100, and then repay it, with fees and tips. This typically happens over seven to ten days, which led to high annualized interest rates.
DailyPay, for example, offers a seven-day $20 paycheck advance as its most common loan, which it offers for $2.99. However, the loan actually reflects an annual interest rate of more than 750%.
The AG argued that the company promised financial freedom to its customers, while at the same time, it pushed them into outrageously expensive loans. James called it “downright shameful,” noting that these are payday loans by another name.
DailyPay Tried To Discourage The Investigation
The lawsuit comes only days after DailyPay actually sued James to try to stop the case. The company’s chief legal and strategy officer, Jared DeMatteis, stated at the time that the AG office’s actions suggest that it prefers consumers to rely on loan sharks or pay higher overdraft and late fees, rather than use on-demand pay, which was proven safer and cheaper.
However, after conducting the research into the firms, James also found that they engage in deceptive advertising. MoneyLion, for example, promises instant access to funds and a 0% interest rate, plus a fee-free product, when in reality, it had mandatory fees for every offered loan which offered funds immediately.
On top of that, MoneyLion asks for tips and sets a $100 per transaction, which forces workers to take out repeat loans and pay repeat fees if they want to take out $500 that they were prominently promised in ads.
According to the AG, one worker took out over 450 loans from DailyPay in under two years, which averaged in more than 4.5 loans per week, resulting in $1,400 in fees.
